In applying for formula grants, State and local correctional facilities are encouraged to adopt comprehensive approaches to substance abuse testing and treatment of offenders, including relapse prevention and aftercare services. Grant funds are allocated using the following formula: (1) each participating State is allocated a base amount of 0.4 percent of total program funds available; and (3) remaining funds are allocated to participating States in relation to their prison populations. Grant funds may be used to implement residential substance abuse treatment programs that provide individual and group treatment activities for offenders in residential facilities operated by State and local correctional agencies. States are encouraged to develop comprehensive substance abuse treatment strategies for providing services in both correctional institutions and community-based programs. Applicant States must agree to require urinalysis or other reliable forms of drug testing. In addition, States must give preference to subgrant applicants who will provide aftercare services to program participants. Grant fund application requirements and administrative provisions of the grant application process are described. Appendixes provide information on fiscal year 1998 State formula grant applications and grant application forms.